‘Crashbook’ Slide Scares Investors
Read Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay for an overview of various historical financial bubbles and the mass manias that propelled them. Then consider Facebook. Same thing, different day.
“Facebook is in freefall, and Wall Street is sounding the alarm bells as even the social network’s earliest backers cash in their crumbling shares… The company’s stock hit another low yesterday with shares trading at less than half the value they were when Facebook went public in May… The shares are coming under pressure not only from external forces… but also from the inside… Employees, board members and early investors — like Peter Thiel and co-founder Dustin Moskovitz — are selling their shares, giving Main Street pause.”
It’s really too bad that so many folks got snookered into this, including those who as a result of recent financial stress saw Facebook as their ticket to wealth and could least afford it. Unfortunately, this was a classic case of the convenience store lottery ticket mentality in full swing.
No serious investor with even a modicum of experience would buy something as over-hyped and over-pumped as Facebook. It had no place to go but down. In fact, it was one of the best shorting opportunities we’ve seen in a long time.
The contrarian would argue that the public is usually wrong about just about everything. Admittedly, that may sound overly negative, judgmental, cynical, etc. But it’s worth asking yourself: who would you bet your next dollar on, the public or the contrarian?
While we’re on the subject of investing, bubbles and lottery tickets. Prism Solutions (which is none of the above) had another nice run in August. You can download our August 2012 performance report here.
And in case you missed it last month, our Jul 20212 performance report is here.
As always, we offer you a FREE, no-obligation consultation to answer your questions and see if we can help you achieve your wealth development goals. Get in touch and let’s talk.
And May All Your Investments Be Profitable…
David Taylor and Gordon Philips, Directors
Prism Solutions, LLC
‘Better Investing Through Science’
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